The Kentucky bourbon industry is now facing a potentially existential crisis that puts the lifeblood of its economy in jeopardy. Today, the bourbon industry is thriving with 86 distilleries in operation statewide. Valued at close to $9 billion, it has recently experienced an acute turn from booming sales expansion to collapse. In fact, bourbon sales exploded by 7% across the world between 2011 and 2020, at least according to stats from the Kentucky Distillers’ Association. This growth has dramatically decreased to just $0.02 growth between 2021 and 2024, leaving people wondering what’s next for the industry.
Reasons for this decline are an overproduction of bourbon and a falling out in prices. More than 10 million barrels of bourbon are currently aging in warehouses all over Kentucky. This surplus has created a saturated market. Bulleit Bourbon saw an even worse sales slump, down more than 7% for this fiscal year. Simultaneously, Wild Turkey went through an overall 8.1% sales decline over the past half year. It recently took a turn for the worse when LMD Holdings declared Chapter 11 bankruptcy in July. Earlier this spring, Garrard County Distilling similarly went into receivership.
As bourbon became an iconic piece of Americana in 1964, when Congress designated it as a “distinctive product of the United States,” its reputation has remained strong. The recent turn of market events has especially rattled industry executives. Lawson Whiting, CEO of Brown-Forman, lamented the effects that tariffs were having on sales, saying,
“That’s worse than a tariff, because it’s literally taking your sales away, completely removing our products from the shelves … that’s a very disproportionate response.”
Tariffs have made quite a splash in the industry. Of course, companies are feeling the pressure of skyrocketing costs themselves, and they’re passing on those hikes to consumers. Senator Rand Paul noted,
“Well, tariffs are taxes, and when you put a tax on a business, it’s always passed through as a cost. So, there will be higher prices.”
The backlash from these tariffs has allegedly been a boon for Canadian spirits companies. Robin Wynne, a Canadian spirits entrepreneur, remarked on the competitive advantage gained by Canada in light of the tariff situation:
“The tariff war has really done a positive for the Canadian spirits business.”
Wynne stressed the importance of changing bourbon the market. As a last note, he cautioned that consumer behavior has shifted significantly in the past few years. He stated,
“Everyone was going crazy over the bourbon market, and treating like a commodity, like a stock.”
This excitement prompted a speculative bubble in which flippers made 2-3x their money reselling bottles on the secondary market. These types of practices are indicative of a broader generational shift in consumer preferences and behavior. Marten Lodewijks noted,
“You often see these kind of generational shifts where people don’t want to drink what their parents drink.”
And with younger consumers more adventurous than ever, chasing unique flavors and experiences, legacy brands will find it increasingly difficult to hold onto their market share. Industry experts predict further financial turbulence ahead. Lodewijks stated,
“I’d be extraordinarily surprised if there weren’t more bankruptcies and more consolidation.”
Distilleries are grappling with challenges on the logistical front. Notably, Jack Daniel’s parent company recently closed a barrel-making plant in Kentucky, further illustrating the industry’s struggles. The impact of this oversupply, when coupled with changing consumer preferences, creates urgent issues with both sustainability and continued expansion in the bourbon market.
Canada controls about 10% of the total whiskey and bourbon market in Kentucky. That just goes to show you the brutal competition that U.S. distilleries are fighting against. As they navigate a radically altered marketplace and increased global competition, balancing quality with correcting oversupply will be odious but essential.